SMG Team Places 1st in US, 2nd in World in CME Group Trading Challenge

in Graduate Students, MSMF, News, Students
March 24th, 2014

It started in a McDonald’s. After registering for the annual CME Group Trading Challenge, a team of four students in the Mathematical Finance program—a team that would ultimately place first nationally and second globally in the challenge—sat down to lunch at the fast food restaurant in Kenmore Square. They noticed a scratch on their table that closely resembled a lighthouse and, at that moment, Team Lighthouse was born. It was the first of many real-life observations that would direct them through an intense competition and perhaps the easiest consensus of the four-week challenge.

“We liked the symbol of a lighthouse,” said Lingchen Guo (MSMF’15), an analyst on the team, “and thought that it sounded like the name of an actual futures company.”

With their team name chosen, Lingchen (Frank) Guo (MSMF’15), Sarah Hochstatter (MSMF’15), Duyong Lee (MSMF’15), and Anastasios (Tassos) Mallis (MSMF’15) began their path to victory in the CME Group Trading Challenge, a worldwide online competition where teams of undergraduate and graduate students trade a variety of CME Group products from multiple asset classes in a simulated trading environment.

Occurring on a real-time professional trading platform provided by CQG, CME Group’s Trading Challenge, hosts a growing number of teams and countries each year. In 2014, nearly 400 teams from 31 countries participated, including four other BU teams.

The diversity of the competition can be seen in Team Lighthouse itself, whose four members come from the US, China, Korea, and Greece. Their range of backgrounds worked to their advantage, giving them knowledge of foreign exchange, one of the six asset classes in the challenge.

The Trading Challenge lasts four weeks and includes a practice round, a preliminary round, and a championship round. Over the course of the competition, the team’s analysts, Guo and Hochstatter, carefully watched market news, anticipating fluctuations, spikes, and drops. The pair reported their findings to Lee and Mallis, who traded based on these market reactions—and their own gut reactions.

Nerves of steel

Mallis took the night shift, trading from midnight to 7 a.m., and though he lost a lot of sleep, he didn’t lose much money, making responsible but substantial trades in the early market hours. It was Lee who took chances during his 8:30 a.m. to 4 p.m. shift. As Mallis puts it, he made the small trades that laid the foundation for Lee, who built higher and higher upon it.

“You need to lay ground so you can begin to construct buildings,” Mallis said. “Duyong constructed tall buildings. He has nerves of steel.”

The traders made educated orders and trusted in the strategy that Guo and Hochstatter devised. With adjustments made from the preliminary round to the championship, their strategy earned them a spot in the winner’s circle. Team Lighthouse placed second in the world and first in the US.

“It was about having the stomach to believe in your strategy,” Mallis said.

Learning from everything

From meeting deadlines to delegating functions to communicating properly—whether that meant providing helpful market information or simply texting the group in a timely fashion—the team learned a number of lessons about succeeding in the marketplace.

“The competition combined fundamental and quantitative knowledge,” Mallis said, “and we learned a lot from our Program’s courses.”

Led by Executive Director Dr. Ahmad Namini, who emailed students encouraging them to join the CME Group Trading Challenge, the MS in Mathematical Finance (MSMF) program is a 17-month program including a summer internship that focuses on the three disciplines of finance, applied mathematics, and computer science.   The results create candidates with core competencies in creating effective investment strategies, quantitative analysis, and risk management.  Each January the graduates start their careers in investment banks, commercial banks, trading firms, and even financial technology and insurance companies.  The Program is one of the pioneering programs, which brings hard-to-find talent to the financial industry.

Team Lighthouse’s journey will end a long way from the scratched McDonald’s table they started at. Placing in the top four they collect a cash prize and an invitation to visit Chicago for CME Group’s Day of Market Education. The invitational conference provides students with an exclusive look into CME Group and the financial industry. Business experts will deliver presentations relevant to the global marketplace, and attendees will view live open outcry trading, learn about CME Group’s electronic trading platform, CME Globex, and join industry leaders for a networking reception and dinner.